Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $4 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $6 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 6%. If the firm's investors expect to earn a return of 16% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price

Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $4 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $6 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 6%. If the firm's investors expect to earn a return of 16% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Similar questions

Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 34% for the next 2 years, 19.50% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 5.75%. The company’s last dividend was $1.60, its beta is 1.95, the market risk premium is 8.50%, and the risk-free rate is 6.50%. What is the current price of the common stock?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. A. $18.18 B. $14.91 C. $16.00 D. $19.64 E. $16.55
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 31% per year - during Years 4 and 5, but after Year 5, growth should be a constant 6% per year. If the required return on Computech is 18%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent.
Synovec Corporation is growing quickly. Dividends are expected to grow at a rate of 29 percent for the next three years, with the growth. rate falling off to a constant 6.8 percent, thereafter. The required return is 15 percent and the company just paid a dividend of $3.15. What are the dividends each year for the next four years? Note: Do not round intermediate calculations and round your answers to 2 decimal places, e.g.. 32.16. What is the share price in three years? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g.. 32.16.
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $2.00 coming 3 years from today. The dividend should grow rapidly at a rate of 55% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 9% per year. If the required return on the stock is 15%, what is the value of the stock today? (Assume the market is in equilibrium with the required return equal to the expected return.) Do not round intermediate calculations. Round your answer to the nearest cent. $
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 55% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 5% per year. If the required return on the stock is 14%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent.
Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $2.00 coming 3 years from today. The dividend should grow rapidly—at a rate of 26% per year—during Years 4 and 5, but after Year 5, growth should be a constant 4% per year. If the required return on Computech is 17%, what is the value of the stock today? Do not round intermediate calculations. Round your answer to the nearest cent. $

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